Greek debt concerns remain in the background for the euro - MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the Euro-zone finance ministers reportedly stated that they were ready to push to break the current stalemate between Greece and its creditors.

Key Quotes

“Greece faces a EUR3.5 billion debt repayment in July which it will be unable to meet without further financial support. Italy’s Finance Minister Padoan described yesterday’s meeting as an important step towards overcoming the impasse and unblocking the provision of further financial support for Greece. German Finance Schauble signalled that they are ready to explore ways to ease Greek debt repayments which had previously been seen as unnecessary.

Euro-zone finance ministers are seeking an agreement at a meeting on the 24th May. The package would require Greece to prepare “contingent” budget cutting measures to be enacted if its public finances failed to improve sufficiently, as well as parallel commitments from euro-zone nations to deliver promises on debt relief. Potential options under discussion included interest payment holidays or extensions of debt maturities. The developments remain a side issue so far for the euro having little to no impact on spot rates reflecting the assumption that an agreement will eventually be reached to extend financial support to Greece. Nonetheless it is a downside tail risk which is worth monitoring.”